Fighting Spirit

Vodka Maker Is Taking His Label to the Next Level

Paul Kozub says that, since the day he started his ambitious business venture, people haven’t been shy about asking him for a job.

“It’s understandable — this is the vodka business, and people think it’s sexy,” said Kozub, who took his brand, V-One, to the marketplace through Valley Vodka Inc. in 2005. “And what’s better than going into bars and buying people drinks and being out all the time?”

Kozub is still getting asked about employment opportunities, but these days, the requests are increasingly coming from what he called the “right people.”

That’s the phrase he used to describe industry veterans, people who have been selling spirits either retail or wholesale for years, and certainly know the landscape and the many changes that have come to it. These are also the people who have watched V-One make some inroads locally and elsewhere, Kozub went on, and think enough of its future to want to be part of it.

“Within the past year, people have been approaching me who have been in the business for 30 years, and they see the potential” of V-One, he explained. “They want to come on board and sell the product. That tells me that we’re making noise outside the Western Mass. market.”

Such job inquiries are one of many signs and developments that Kozub believes are indicators that his brand is making the kind of progress — albeit more slowly than anticipated — that he envisioned when he started this enterprise with some of his own money and a loan from TD Bank, the institution he once served as a commercial lender.

“I’ll be pumping gas in Springfield, and the guy behind the register sees the V-One jacket when I go inside to pay and says, ‘that’s all I drink now,’” Kozub told BusinessWest, citing this as one of many forms of confirmation that his brand has arrived. “And before, when a new restaurant opened, I would have to call them to get V-One in their establishment; now … they call me.”

There are other positive signs, he said, including many indications that a regional and national shift toward lower-priced vodkas, spurred by the prolonged recession and its impact on many forms of spending, has finally started to ease, with the needle moving back in the other direction.

Still, there are myriad challenges ahead for Kozub, who wants to take his label to other parts of the Northeast and eventually across the country. He listed everything from intense competition that is only growing — “Donald Trump has a vodka; Fuzzy Zoeller has a vodka” — to the introduction of flavored vodkas, a market he’s been trying to enter but without success, to growing frustration with a distribution industry he believes is structured to the clear advantage of the exponentially larger players in the market (much more on that later).

While things haven’t come close to going as anticipated — at least as spelled out in his first business plan — Kozub is, by and large, seeing the kinds of growth numbers he envisioned (roughly 20% a year), and his vodka continues to win awards from the various organizations that taste and rate spirits. And the bigger prizes — a national presence and perhaps one of those seven-, eight-, or even nine-figure buyouts from the global giants, similar to several seen over the past several years — remain within sight and perhaps within reach.

For this issue, BusinessWest, which first profiled Kozub when he was literally a one-man show with no resources to hire anyone, sat down with the entrepreneur for a long look at how far he’s come — and still has to go — in this challenging and highly competitive industry.

Proof Positive

By now, most area residents are familiar with Kozub’s story, and specifically how he was initially inspired to make what amounted to bathtub vodka by his grandfather’s stories about his exploits in bootlegging.

Kozub, intent on trading his desk at the bank for some form of business ownership, would go on to read everything he could on the subject of vodka making, and eventually traveled to Poland to consult with noted vodka maker Marek Brniak. Soon thereafter, he took most of the money his grandfather left to him, plus some of his own, to create a label, one that would be produced in Poland using state-of-the-art technology to make it as pure as possible, and with wheat, rather than potatoes, as its base.

The brand started slow, with Kozub handling everything from distribution to marketing to bookkeeping, before soon establishing a foothold in Greater Springfield and beyond.

It’s been an entrepreneurial tale told repeatedly in the press, and one that Kozub has related himself before chambers of commerce (he was a keynoter for a recent Super 60 luncheon, for example), Rotary clubs, and other groups.

The gist of the recent message is that, while Kozub knew going in that nothing was going to be easy about his bid for stardom in the vodka business, there have been far more challenges and hurdles than he could ever have envisioned — and there are more in the path that lies ahead.

Returning to his comments about his face — and brand — being recognized at the gas pump, the Big E, and other places, he said, “that took a lot longer than I anticipated it taking; I naively thought that after a year or two of promoting V-One it would catch on and I could sit back and relax.”

One of many things he said he’s learned, sometimes the hard way, is that one can never stop marketing a brand, a lesson driven home during one of his many trips to the distillery in Poland, located in the college town of Lublin.

“On a Monday, I’m walking out of my hotel, and on the corner I see two young people from Coca-Cola handing out free samples of Coke,” he recalled. “That just drove home for me the point that, when you have a product like Coke or V-One, you’re constantly promoting; you never stop.”

By absorbing such lessons, Kozub has managed to create some headway with his basic business game plan — altered as it has been over the years — and remains as optimistic as ever about making a place for himself along the vodka aisle and in the hearts of consumers.

He’s already accomplished those missions — for the most part, anyway — in the Greater Springfield area, where his label is now in most liquor stores, restaurants, and bars. And he’s making headway in other markets as well.

He’s now up to nine employees, including three full-time salespeople — one in Boston, one in Connecticut, and a third that works with Kozub to handle Western Mass. — and he’s wrapping up one of his most successful years yet, with sales up 30% to 35%, by his estimate.

Summing up the state of V-One, Kozub borrowed from the story of Sisyphus — well, sort of.

“We’ve been pushing a rock up the hill,” he said of the trials, tribulations, and successes from the first seven years in business. “And finally, in some small respects, we’ve reached the top of the hill, and now the rock’s rolling down the other side.

“In the Pioneer Valley market, we’re beyond my wildest expectations,” he continued. “In most all of the most successful restaurants, V-One is among the top pours, and in the major liquor stores, V-One is one of the top-selling vodkas, outselling some of the biggest brands in the world, like Grey Goose, Stoli, and Kettle One.”

Taking His Best Shot

But while he’s reasonably content with how far his brand has come in seven years, Kozub said there have been many frustrating turns for this business as well.

There have been some personal problems — a marriage dissolved a few years ago (the good news is he’s now engaged) — and that aforementioned turbulence with the economy and its impact on the higher-end vodka market in which he operates.

Actually, the Great Recession, coupled with a huge influx of new brands — fueled by the 2004 sale of the Grey Goose label by owner Sidney Frank to Bacardi for $2.2 billion — caused great stress within the vodka market.

“By 2007, everybody had a vodka out, and they were starting to grow in new markets,” he said. “And then, in 2008, with the economy doing what it did, it was like a double whammy, where the market was so saturated with all those new brands and so many people trading down.

“It took about four or five months for me to really see what was happening,” he continued. “Grey Goose came out in 1996, and 2008 was the first year their sales went down. All luxury brands went down that year; they weren’t drinking less, but they were trading down to brands that cost half as much as mine or Grey Goose or Belvedere.

“That was the time I was trying to grow,” he went on. “I was the guy entering new markets with a luxury vodka, and everyone was saying ‘luxury vodkas aren’t selling right now.’”

Looking back, Kozub recalled that surviving those trying times only served to make him stronger — personally and as a business owner — and more determined.

He said he never used the economy as a crutch, and managed to still grow the business at that 20% clip, while acknowledging that he could have doubled that pace had the conditions been better.

In 2010, the brand got a boost from a strong showing — unanimous first place in the vodka category at a competition at the World’s Fair in San Francisco. That showing led to a spike in interest in Australia, Ireland, and other countries, but Kozub was determined to be conservative when it came to how, and where, to grow the company.

He eventually sold what he called a small piece of the company to a group of investors who provided the capital needed to create more inventory and hire two new sales representatives, industry veterans, specifically for the Boston and Connecticut markets. The goal was to double sales in the Boston area, said Kozub, adding quickly that this hasn’t been accomplished, primarily due to constraints from the distribution system.

“It’s been a struggle dealing with their distributors,” he said, referring to those that handle the Boston market. “Part of the problem is they sell 3,000 products, and they sell some of my competitors’ products. And if they sell more V-One, that means they sell less Kettle, and who’s the bigger fish? Kettle, obviously.

“I think the liquor-distribution system is broken,” he continued, adding that he is formulating an idea that will create more visibility, and sales, for V-One and other smaller brands.

This would be a non-traditional distribution model that would involve “franchising” V-One and other brands (one of several different kinds of products) to smaller distributors who would handle these labels exclusively.

The concept is still in the embryonic stage, and would involve another sizable infusion of capital, said Kozub, adding that something could develop over the next year or two.

“There are some really exciting opportunities for me in New England and across the East Coast to set up this kind of small-distribution network,” he went on, adding that he has talked to other players in the industry who believe they could also benefit from such a system. “If this develops as I believe it can, we could get much bigger more quickly, like five states instantly.

“The more in control I am with my product, the better it does,” he continued. “With the big distributors, you don’t have as much control; you’re giving them 25%, and at the end of the day, they’re at the whim of the big brands.”

Pour Examples

While coping with distribution issues, Kozub has many other matters to address.

Indeed, as he stood by the large, colorful V-One display on one end of the vodka aisle at the Table & Vine liquor mart in West Springfield, where his brand is now the largest seller, Kozub could easily point out some of the obstacles facing those pushing that proverbial rock he mentioned.

For starters, there’s the simple length of that aisle and the myriad choices one now has when it comes to that spirit.

“Selling alcohol, and especially vodka, is very difficult,” he explained. “Vodka is the most competitive of all the spirits, and in 2004, when Grey Goose sold out to Bacardi, that was the start of the vodka gold rush. Now, everybody and his grandmother wants to be wants to the next Sidney Frank.”

There’s also some lingering effects from the downturn, which have many people still favoring the more moderately priced options on the shelves, although the worst appears to be over.

And then, there’s the soaring popularity of flavored vodkas, especially among the younger generations.

Indeed, while posing for a few pictures for BusinessWest, Kozub worked hard to steer two young women toward his product — among his pitches was a vow that drinking V-One wouldn’t lead to a hangover because of its purity — and away from Pinnacle’s whipped-cream flavor, perhaps the most popular on the aisle and one of 50 that the still-young company is now selling.

It was a fight he ultimately lost, thus providing more evidence of something he already knew — that he would eventually have to extend his line of products, and the sooner, the better.

And with that, he took out his iPhone and summoned a picture of a pink bottle, one that could eventually hold his first flavored vodka. He was careful not to mention the flavor or even provide any hints (competition being what it is), but did say that he’s working to have the product on those same shelves by Valentine’s Day, although that timeline might be ambitious.

“Flavored vodkas now represent half of every bottle sold, where maybe five years ago, it was 10% or maybe 20%,” he said, underscoring the importance of his current, top-secret initiative. “So, if you don’t have a flavored vodka, you’re not really in the game.”

It’s always been Kozub’s goal to not only be in the game, but to win it, with the understanding that there are several ways to win.

Taking V-One national and then to global markets himself is one way, while becoming the next Grey Goose — or even the next Pinnacle, which was recently sold (along with another label) to Jim Beam for $600 million — is obviously another.

“Grey Goose sold for $2 billion, and I always say I’m not going to be greedy — I’ll take $1 billion,” he said with a laugh. “I can’t imagine ever selling V-One, but if it ever got to a certain point where we’re talking about that kind of money, where your grandkids don’t have to worry about things — that’s something I think about.”

Shaken, Not Stirred

Looking back on his seven-plus years in the vodka business, Kozub described it as one long, sometimes-painful learning experience, one he believes has steeled him for what is to come.

“There’s never been a day I’ve regretted leaving banking to do this, but there were plenty of days that have been extremely difficult,” he told BusinessWest, listing everything from cash-flow issues to the difficult and time-consuming nature of managing a staff.

Looking forward, he said that, with the rock now on the other side of the hill, he’s confident that his venture will continue to gain momentum and speed.

How long the roll will continue and when and where it will end all remain to be seen, but Kozub has the requisite fighting spirit for this battle — both literally and figuratively.

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